Premaitha Health Plc (LON:NIPT) uses the latest advances in DNA sequencing technology for non-invasive prenatal screening tests. IONA estimates the risk that a fetus has any of Down’s, Edwards’ or Patau’s syndromes caused by a genetic abnormality. Although IONA is entering a competitive and litigious market, it has some advantages, is CE Marked and is the first to win a UK NHS contract. Premaitha is subject to distracting IP infringement claims but 1H’16 results showed early signs of commercial traction which are expected to accelerate herein. Also, Premaitha has signed a strategically important partnership with Thermo Fisher which adds considerable credibility.
► Strategy: Premaitha is using the latest DNA analysis technology for non-invasive prenatal screening (NIPT). Management is focused on the commercialisation of its flagship IONA test globally. Whilst not currently in planning or development this technology could be used for early detection of other diseases (eg cancer).
► IONA: This test is a screen for risk assessment that a fetus has a serious genetic disorder. The test is extremely accurate (sensitive) with few false positives and eliminates the need for unnecessary invasive follow-up tests that cause anxiety and stress. An option for sex determination has been added recently.
► Valuation: Similar quoted companies are more mature and have considerable sales from the US market. Companies looking for access to NGS technology have paid handsome prices, again for more mature companies. However, both these statistics augur well for Premaitha as it develops sales traction with IONA.
► Risks: After receiving CE Mark for IONA, Premaitha received notification that Illumina Inc had filed patent infringement claims against the company. Although Premaitha will put up a vigorous defence in the UK, litigation is an expensive, time consuming distraction and carries obvious risks if the claims are successful.
► Investment summary: Premaitha Health Plc has an EV of £30m. The IONA test is the only product for NIPT with regulatory approval in Europe. Although the patent litigation is a distraction, commercial partnerships are being signed and these will drive future revenue growth. Our conservative assumptions, based on signed deals, still suggest that Premaitha will be EBITDA positive in fiscal 2018.
